Alternative Energy Certificates (AECs): a Massachusetts thermal energy incentive

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Massachusetts homeowners experience some of the highest energy bills throughout the country; cold winters and humid summers lead to expensive heating and air conditioning costs. This has many Bay Staters looking towards clean heating technologies – such as solar hot water systems or air source heat pumps – as a way to curb these costs.

Though both air source heat pump and solar hot water technologies save homeowners on energy costs long-term, they can require a larger upfront investment than conventional heating and cooling technologies. Fortunately, in an effort to promote energy efficiency and renewable energy, the state of Massachusetts offers multiple incentives to help decrease the overall cost of these technologies. One such incentive is alternative energy certificates (AECs).

What are AECs?

Alternative energy certificates (AECs) are a financial incentive available to people using renewable thermal technologies to heat their building, water supply, and more. These technologies include solar thermal systems, air source heat pump systems, ground source heat pump systems, woody biomass systems, geothermal, and more. While air source heat pumps aren’t always run on renewable energy, they are still eligible for this incentive because they run off naturally occurring temperature differences in the air.

As you generate thermal energy through these technologies, you produce certificates to sell to utility companies. Utilities purchase these certificates because they need to meet certain requirements for clean energy generation, as mandated by Massachusetts’ alternative energy portfolio standard (APS).

A single AEC represents 3,412,000 British thermal units (BTUs) of net useful thermal energy.

Eligibility requirements: solar hot water systems and air source heat pumps

Not just any type of renewable thermal technology earns AECs; the eligibility requirements from one technology to another vary considerably. Fortunately, the overwhelming majority of solar hot water systems are eligible for AECs. However, with air source heat pump technologies, the eligibility criteria is a bit more strict.

For one, any air source heat pump you install needs to be your primary heating source in order to be eligible for AECs. In fact, you’ll likely need to remove your backup heating system (i.e. furnace, boiler, etc.) in order to receive AECs with your air source heat pump installation. If you’re only planning on using ductless air source heat pumps for air conditioning or zone heating in specific rooms of your house, you won’t be eligible for AECs incentives.

Additionally, only certain types of air source heat pump technologies are eligible for AECs. If you’re hoping to receive AEC benefit, you’ll need to make sure the air source heat pumps you buy are ENERGY STAR certified and are designated cold-climate heat pumps. To make it simple, the Massachusetts Department of Energy Resources (DOER) provides a list of AEC-eligible small air source heat pump products that property homeowners can take a look at when shopping for their HVAC upgrade.

For more information on what types of air source heat pump installations qualify for AECs, visit the Mass DOER’s website.

How much can I earn with AECs?

AECs work in a similar way to the state’s solar renewable energy certificate (SREC) market in the sense that the amount you’ll earn in certificates is based on the energy production of your system. Additionally, AECs are also a market-based incentive like SRECs, so the value of each AEC is dependent on supply and demand in the market at the time they’re minted and sold. Today, most AECs in Massachusetts sell for somewhere between $15 and $20.

Depending on the size of the system you install, you’ll either earn AECs over a ten-year period or get paid upfront. If you install solar hot water collectors or air source heat pumps on your home, your AECs are paid out as an upfront lump sum once the installation is complete. Larger commercial systems, however, receive payments over time, therefore they require performance monitoring.

How do I sell AECs?

Most property owners work with aggregators to sell AECs on their behalf. These types of companies manage the AEC qualification process with the DOER, and then sell groups of AECs for the most competitive price possible. Different aggregators will have varying contracts and fees for their services.

If you’re looking for an aggregator to work with for your solar hot water or air source heat pump installation, the DOER provides a useful list of aggregators by renewable thermal technology type.

Calculating AEC benefit for solar hot water and air source heat pump technologies

It can be tricky to determine just how much you can receive in AEC payments. Fortunately, the DOER provides an AEC incentive estimator tool to help you and your installer determine how many AECs you may be eligible for.

The calculations for estimating AEC incentives vary greatly from one thermal technology to another.

Solar hot water

How much you’ll earn in AECs for a solar hot water system depends on the number of solar collectors installed, the performance ratings of the system, and site-specific conditions such as shading and orientation.

If you have an active solar hot water system, you’re eligible for a 3X multiplier, meaning that the DOER gives you three times as many AECs than your system actually generates.

Below is a table from the DOER that shows approximately how many AECs you’ll generate per year:

Number of solar collectorsEstimated number of AECs per year (including 3x multiplier)Estimated number of AECs generated over 10 years
214.7147
322220
429.3293

Assuming the AECs above and an average price of $20 per AEC, you can generate roughly $300 dollars per year with two collectors, or $580 a year with 4 collectors.

Air source heat pumps

The amount of AECs air source heat pump systems generate depends on a number of factors, including but not limited to the size of the space it’s heating, whether it’s a retrofit installation, and the efficiency of the system.

As far as multipliers go, small air source heat pumps (less than 134,000 Btu per hour) that supply less than 100 percent of your building’s heating load are eligible for a 2X multiplier, while those covering all of your heating needs are eligible for a 3X multiplier.

Below is a table from the DOER that estimates how many AECs you’ll generate per year with small air source heat pumps.

Area of Conditioned Space (sq ft)Estimated number of AECs per year (including 3x multiplier)Estimated number of AECs generated over 10 years
Less than 1,500990
2,00012120
2,50015150
3,00018180
3,50021210
4,00024240

Assuming the AECs above and an average price of $20 per AEC, you can generate roughly $300 dollars per year heating a space of 2,500 square feet, or $480 a year heating 4,000 square feet.

Additional incentives for clean heating and cooling technologies

AECs aren’t the only incentive available for clean heating technologies; in Massachusetts, there are state tax credits, rebates, and other incentives available for renewable energy and energy efficiency upgrades. Learn more about the current clean energy rebates available from Mass Save, and make sure to talk to ask your local installer about any additional state incentives you may be eligible for.

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